by Alexander Klein:
In the midst of the rainy season in Namanhumbir, Mozambique, the air inside the village’s only clinic—a small, cinderblock building on the outskirts of town—is hazy and humid. It is Monday afternoon, and over 40 patients are sitting on the floor, waiting to be seen. This overflow is common; HIV-positive rates in the province approach 45 percent. Camino Jose, a clinic worker, chats about his job as he takes his break. An eligible bachelor, he chuckles as he discusses the pros and cons of the single life. A serious drawback, he points out, is that he has nobody to cook for him. But this challenge has recently gotten much easier.
A few months ago, VillageReach, a local nonprofit organization, and VidaGas, its sister commercial energy business, brought something new to this part of northern Mozambique: clean-burning propane. Originally used in the clinic to fuel sterilizer burners and maternity- ward lamps, the propane also proved helpful in Jose’s kitchen. “I went out and bought the propane and burner at the market, and now cooking is easier, much better than a wood fire,” he explained. “Being single is much more enjoyable now.”
Although he may not know it, when Jose uses the same propane to sterilize tuberculosis vaccination needles that he does to fry up his maize and piri-piri, he is taking advantage of a new developing world phenomenon: social business, or “not-just-for-profit” enterprise.
The Private Partnership
Blaise Judja-Sato is a native Cameroonian, a graduate of France’s Université des Sciences de Montpellier and of the University of Pennsylvania’s Wharton School M.B.A. program. In 2000, he gave up his lucrative job as regional managing director for AT&T International to found VillageReach, a nonprofit that works in remote areas of Mozambique to train medical workers, improve refrigeration and delivery of vaccinations, and provide clinics with critical equipment.
In 2002, VillageReach founded VidaGas, an unashamedly commercial propane business. The partnership had a dual goal: VidaGas’s propane would fuel the tools that VillageReach provided the clinics, while a portion of its revenues would go toward purchasing the nonprofit’s health equipment and paying its employees. VidaGas would not be profitable immediately, but the goal was to enter the black within a few years of operation.
However, as the VillageReach-VidaGas partnership developed and a new market for propane opened, the former businessman saw the unique opportunity that social business could bring to the community. “We built [VidaGas] because we needed that critical private input to meet our higher goal: achieving high quality healthcare,” said Judja-Sator. “However, in executing this, we realized that it was very limiting to consider VidaGas solely as a provider to the health- care system. VidaGas had a broader role to play in the community.”
The Multiplier Effect
The unexploited need for a new energy source was dramatically unleashed: the company now sells over 14 tons of propane per month, providing for a population of over 5.2 million. Originally, all distribution was devoted to the healthcare system, but today, 60 percent of VidaGas’s sales are to businesses and another 30 percent to private consumers.
local businessmen have added the propane to their inventories and made profits selling and delivering it to households throughout the province. Other customers have turned to the propane to completely transform their businesses. VidaGas was even able to offer mutually profitable microlending options to local entrepreneurs, helping them afford the fuel, grow their businesses, and employ more workers. In March 2007, VidaGas had grown to supply 251 clinics, eight hotels, six restaurants, and the entire commercial shrimp operation of Pemba, the capital of Cabo delgado province.
Lawrence McGraff, general manager of the Pemba Beach Hotel, recognized the benefits of VidaGas for his own business and for the region. “They really perform a vital service for the community,” he said. As for social enterprise in general, McGraff told the Globalist, “For the community and our local businesses, it’s a bloody good idea!”
Put together the combined economic benefits to these households, distributors, retailers, welders, entrepreneurs, hoteliers, restaurateurs, and fishermen, and you have what Judja-Sato calls “the economic- multiplier effect,” where one social enterprise starts a cycle of widespread, ground-up economic growth.
Though VidaGas has not yet achieved profitability, its business has expanded rapidly, and few doubt its potential for high revenue down the line.
This enterprise-driven model of economic development has even drawn attention from those outside of Mozambique. In 2006, The Skoll Foundation, a Silicon Valley-based nonprofit, granted VillageReach and VidaGas a three-year award of $740,000. Lakshmi Karan, the foundation’s director of impact assessment, explained to the Globalist, “VillageReach fits our sweet spot: it has an innovative approach to addressing a large-scale social issue.” The main reason that VillageReach won the grant? “The financial sustainability plan through VidaGas.”
Healthy Success
“Of course,” Judja-Sato pointed out, “by increasing income, individuals in the local community will be able to get better access to health- care.” Yale School of Public Health Professor Jennifer Ruger agrees. “Equitable economic growth, with poverty reduction, is a critical social determinant of health,” she said.
As propane flowed and VidaGas continued to expand its operations, the quality of care in the clinics covered by the business increased dramatically. More children were getting vaccinated, and medicines could travel greater distances in VidaGas-powered refrigerators. Households and restaurants were able to make the switch from hazardous wood and charcoal fires to clean-burning, environmentally sound propane. Women and girls no longer had to inhale dangerous amounts of harmful particulates when preparing meals.
Since the commercial partnership began, the number of children fully immunized in the Cabo delgado province has risen by 40 percent. Enthusiastic success stories have begun to emerge from the clinics. Amelia Vasconelho, a midwife in the town of Chure, spoke with the Globalist during her evening break on a particularly rainy fall night.
Pointing to the small, red cylinder of propane in the corner, she said, “There was an electricity failure late at night, and there were two mothers giving birth. We used the propane lamp for the procedure.” For clinic workers like Vasconelho and Camino Jose, VidaGas propane has transformed their work at once while also securing future aid through its sustainable business model.
Blind Giants
Judja-Sato did not always plan to create VidaGas. In VillageReach’s early days, Judja-Sato tried in vain to partner with multinational energy companies. “I talked to Chevron, I talked to Texaco. Imagine: our impact could have been multiplied by thousands!” They weren’t interested. With the short-term benefit of such an investment questionable, the energy giants passed up the opportunity.
As VidaGas expanded, it was not just fueling a burgeoning health- care system and a local economy—it was also shattering pessimistic preconceptions about the viability of third-world enterprise. Before VillageReach founded VidaGas, businesses and restaurants had already expressed the desire to switch from charcoal to propane but had no reliable means to do so. The two largest regional energy companies, PetroGal and Afrox Mozambique, were not interested in investing in exceptionally undeveloped areas like northern Mozambique. But as Judja-Sato is quick to point out, “Imagine if a major oil company had joined us. They would have instantly captured the energy market of northern Mozambique.”
The Courage to Invest
Perhaps stories like these will inspire larger corporations to make socially responsible investments. The developing world holds many such untapped markets. In much of the world, regions where investment could do the most good also have the most potential for profitability. It is a simple concept: Where a desire for goods and services remains unfulfilled, there is money to be made.
As Karan of the Skoll Foundation commented, “Though piloted in Mozambique, this model can be successfully replicated in other countries in Africa that face similar challenges.” In her view, it’s “a proven model.”
With a small red cylinder of propane, VidaGas unleashed economic and social growth, improved a healthcare system, and laid the foundation for a profitable business. By using capitalism in innovative ways and taking a risk, social enterprise can seize opportunities like these, opportunities that other businesses have nervously avoided.
Corporations may be quick to pour millions into the development of the latest $400 MP3 player for distribution in familiar, first-world markets, but by selling cheap, efficient, durable products that are well-matched to the low- income regions that want them, social businesses like VidaGas can harness the purchasing power of millions of would-be consumers, who, until recently, have been passed over.
Alexander Klein is a freshman in Davenport College. He worked for VillageReach and VidaGas in Seattle and Mozambique from 2004 to 2007.